Volvo CEO sees plug-in hybrids gaining from backlash against diesels

Hakan Samuelsson: "We believe plug-ins are quickly becoming a third option for European customers."

Volvo CEO Hakan Samuelsson foresees plug-in hybrids gaining greater acceptance in Europe at the expense of diesels. He also expects the Swedish automaker to continue taking market share from rivals in Europe and elsewhere in 2016. He explained why during an interview with Automotive News Europe Managing Editor Douglas A. Bolduc in January at the Detroit auto show.

What do you expect for the European market in 2016?

We finally have a positive industry situation in Europe. We expect this to continue. Our focus is to continue taking market share, which we did in 2015, as we keep moving toward our target of doubling our share of the European market [to 4 percent by 2020].

Diesels sales in Europe were declining before the Volkswagen emissions-cheating scandal. What future do you see for the powertrain in Europe and elsewhere?

First of all, we see no future for diesel engines in the U.S. I mean, we have never seen [strong demand for diesels in the U.S.] After what has happened, you can say clearly that we believe in the gasoline engine and plug-in hybrids for the U.S. and China. In Europe, the situation is different because the fuel price is lower [for diesel compared with gasoline in most countries] so the diesel will continue to play a very important role. On the other hand, gasoline engines are getting better and we believe plug-ins are quickly becoming a third option for European customers.

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The plug-ins will probably take a bit from diesels, but it will not be a revolution. I also think it's important to stress that we need the diesel to reach the CO2 targets [in Europe]. It cannot be replaced overnight. But electrification is a new card in the game that will definitely change things.

What percentage of buyers do you expect to choose your plug-in hybrids?

We foresee 10 percent of our global sales being plug-in hybrids in the midterm. I think the plug-in concept will be very attractive.

Do you need to do more to promote your growing lineup of plug-in hybrids in Europe?

Yes, we will do that. But first we need the new cars such as the XC90 plug-in to come out [in more markets]. Our ambition is to double our market share in Europe and this unique powertrain concept will be a key part of that growth. Having this third option makes Volvo unique.

Volvo sold a record 503,127 vehicles in 2015. What is the next big goal?

We want to reach 800,000 by about 2020. If it takes one year longer, no problem. This company needs a bigger volume to achieve sustainable growth, but we have to adapt to the market. We cannot achieve our goals just by discounting and doing a lot of stupid things. It is not very wise to just have a growth target. You also have to have a profitability target and brand image target.

Which European markets will be crucial to helping you double your market share in region?

Germany would be No. 1 and then the UK and France. Germany is key because you have to show that you are an alternative to the other premium automakers there. That's why it was extra nice to see that we grew in Germany last year [by 13 percent to 36,120 sales].

Will you boost U.S. sales again in 2016?

It will be a good industry situation this year, but for us it’s not that relevant. I think what’s relevant is that we have passed the turnaround point. Now we are focused on rolling out a full year of the XC90 and a half year of the new S90. This can bring us growth in the U.S. market.

And China?

I don't want to go into any prediction and, like in the U.S., the growth of the overall market is not crucial for us. In China it's important to build our brand because we are still not as well known as the Germans in the premium segment. We have a new sedan [the S90], which is very attractive for China, so we'll continue taking market share.

How will the S90 stand out from rivals such as the new Mercedes-Benz E class?

It has two key features. One is its autonomous drive functionality, which means you can basically let the car drive itself on the highway [at speeds up to 130kph]. That is standard in the car, which demonstrates that how important we believe autonomous features are for the Volvo brand. The second is the Twin Engine [plug-in hybrid powertrain], which I think ends the discussion about engine size. The torque and the power that the car delivers has nothing to do with how many cylinders the engine has. It also delivers a totally different level of mileage. This demonstrates our belief in electrification.

Last year 39 percent of your XC90 sales were conquests in Europe. The rate was 50 percent in the U.S. Why is the number so high?

I think we lost some of the customers [in the 13 years between the first- and second-generation models] and now we have to bring them back. I also expect a high conquest rate for the S90 because we did not have enough customers for the S80.

Isn't it going to be tougher to win new customers with the S90?

Yes and no. It's an unproven segment for us. Customers for premium sedans probably do not have Volvo on their shopping lists. But it is a key segment. I don’t think it's a risk. It’s an opportunity.

Are there open spaces in your portfolio you need to fill?

After we replace our bread-and-butter cars -- wagons, sedans, and SUVs in the 60- and 90-series sizes -- we want to grow the scope of our 40 series [C-segment] cars. That car is most likely a compact SUV.

Something smaller than the XC60?

Yes. It would be in the 40-series. In Europe and China we have a compact hatchback [the V40]. We will continue to have that, but I think we need an SUV because the segment is growing very fast.

When will it come?

We have said it will come within the next four years.

The S90 will be built in Sweden and China. Will some China-made versions be exported outside of China?

It could be sourced from either plant, which we have demonstrated with the S60.

Volvo announced in early 2015 that Chinese-made long-wheelbase versions of the S60 would be sold in the U.S. Has there been any backlash from this decision?

No, I have heard nothing. We are absolutely confident that the China plant is delivering exactly what they should deliver. Maybe somebody's questioning [this decision], but I would say to a lesser extent than we thought. I've been with [U.S.] dealers and they don’t see any concern.

Volvo sold roughly 27,350 long-wheelbase S60s worldwide last year. How many of those sales were in the U.S.?

About 5,000, which is not a lot of cars but the workers are very proud that they are the only ones in China making a premium car for the very demanding U.S. market.

Fiat Chrysler CEO Sergio Marchionne has called for additional consolidation of automakers. Has anyone approached Volvo? Do you feel Volvo can stand alone?

Nobody has approached us [to discuss a traditional merger] and we are quite happy about that. Right now we are focusing on our modular platforms, bringing down complexity, and speeding up our development of key technologies related to electrification and autonomous driving.